Usury and the Texas Payday Lending Industry

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Few people love anything like Texans love Texas. It’s a bold claim, but I’ll stand behind it, because from BBQ to two-stepping, bluebonnets to boots, it’s easy to believe. But while big skies and bigger hats are warm and emblematic of the great state, there are many facets of its social architecture that leave room for improvement.

According to the 2010 U.S. Religion Census, the Lone Star State has the largest number of Evangelical Protestants in the United States with roughly six and a half million people. Almost one quarter of the state’s 28 million people identify as evangelical. Considering the breadth of that theological heritage and formidable presence, substantive differences are not beyond the realm of possibility.

 Whereas many associate progress with development against its stringent capital punishment history, other insidious matters exist which are also worthy of consideration, such as the payday and auto title loan industry, where Texas has become one of the most lucrative states for profit. A bit of background here a helpful place to start.

Usurious and Payday Loans

What is usury and what makes a loan usurious? The ERLC, the public policy wing of the Southern Baptist Convention, has written a description of payday loans, stating it is, “the term used to describe the practice of lending small amounts of money to people” until their next payday. What makes these loans usurious however, is the incredibly high interest rate attached to them. For much of history the term was used to mean lending at interest, but it has taken on the meaning of excessively high interest over the recent past. 

Generally, such loans exist because situations arise requiring immediate financial need. A 2016 survey suggests that 69% of Americans have less than $1,000 in savings, meaning the possibility anyone may need quick access to cash or credit is astonishingly high. Any emergency could drain someone of whatever savings they have, whether it be for vehicle repairs, unexpected home maintenance, or the incursion of medical bills. The precarious financial state of many suggests the reality is often wrapped up in the hope of living paycheck to paycheck. Thus, when the situation arises that immediate cash is needed, if one does not have access to credit or others to borrow from, companies offer a quick solution.

So, if there is a tangible need that could be met, what is the problem with the payday loan industry? The issue arises when potential solutions appear to alleviate the issue at hand, while potentially exacerbating the situation. Though loans are promptly offered to those who may otherwise not qualify for them at banks, the interest rate attached to them can be staggering. An Ace Cash Express fee schedule references 14-day loan at $500 in Texas, with interest and total feels would have to be repaid at $626.90, an estimated APR of 661.69%.

The availability and convenience of these loans make them appealing, but the devil is in the details. Someone who takes out a loan to pay for their necessary expenses now finds their self in need of additionalincome to cover the cost of the loan and associated fees. The Consumer Financial Protection Bureau (CFPB) found“more than 80% of payday loans are rolled over or renewed within two weeks.” Stories abound about the cycle of debt that occurs when people cannot get ahead of their debt, drowning as fees and interest rates outpace their ability to repay, strangling the individual in a cycle of debt. There is no doubt that such loans have the potential to help people, the problem manifests later when it fees, interest, and associated costs add up beyond individual’s capacity to pay. 

What’s Happening In Texas?

As precarious as this can be, it is especially pronounced in Texas owing to a multiplicity of reasons. Regulation is severely limited and the industry has found a niche in which to flourish, as several key groups are headquartered in the state. 

Though stronger laws have been suggested, companies have sought ways to deconstruct or circumvent regulations. Payday and auto title loans are effectively banned in several states, but when more rigid legislation was proposed in Texas, some companies responded by restructuring as Credit Service Organizations (CSO’s). However, those who find themselves unable to repay their loan can still find the consequences severe. In the present, there has not been a strong push to implement changes. Senator Ted Cruz was asked about this during his 2018 re-election campaign and showed a reticence towards lending caps, expressing concern for those in need by drawing a comparison to how people would be impacted like in the mortgage industry. Such concerns may be valid, but must consider whether the aggregate is good or not; this is not simply a financial decision, as laws reflect who we are. Other, state level leaders exhibit similar attitudes. While some worry that more constricting regulation could be harmful, there may exist, at the very least, some middling ground.

Things are not all bad, however, as there are groups who remain committed to fighting against on behalf of others. While top-down requests have largely yielded tempered results, butprogress is being made from the ground up. Many cities in Texas have instituted laws designed to curtail or ban such practices and organizations like the Texas Appleseed are attempting to pursue social and economic justice. Additionally, churches have begun to take notice, though there is still a lot of work left to be done. 

The Bible

To establish how Christians can think through the subject, it is good to start with what the Bible says and does not say on the topic. There is always veracity of opinions on such topics, especially economic ones in Scripture, but the focus here will be on the usury triad, three verses in the Pentateuch (Exodus 22:25; Leviticus 25:35-38, and Deuteronomy 23:19-20) which serve as a fulcrum by which a lot of this discussion hinges. 

The three verses specifically focus largely on lending to the poorin their fellowcommunity. prohibiting any interest at all, instead of high rates, in most conditions. As with any hermeneutic, there are certain limitations, particularly that of time, culture, and government that ought to be considered in this discussion. While each verse has its specific focus, there are a few themes which tie them all together.

Exodus 22:25 is where this first occurs, and following a shift where general injunctions are followed by direct speech telling Israel they should “charge no interest” when lending to people around them in need. The language used is extremely sharp, especially for those of us in the West, so it is important to see who is involved in these transactions and why.

A key thread with each of these passages is the status and situation of the people in need. Both Exodus and Leviticus make a point to acknowledge the receivers are explicitly poor, which, in a largely agrarian society meant that external situations like a bad harvest could be devastating to one’s livelihood. Because of theircommunal nature, social cooperation was necessary for survival. These loans, therefore, were not akin to venture capital for economic gains, but were used primarily as a means for survival.  The liability for failing to pay back a loan was severe, as 2 Kings 4:1 reveals; here a widow is worried that her children will have to be sold into debt slavery to indemnify her deceased spouse’s creditors. As Göran Larsson observes in his book Bound for Freedom: The Book of Exodus in Jewish and Christian Traditions, it seems that while anyone was liable to suffer and become in need for economic support, the brunt of this often fell on marginalized groups such as immigrants, orphans, widows, and the poor. Loans could be used to help provide the economic means of survival, but to lend at interest was to take advantage of another’s misfortune. Lending then, was as much a moral act as an economic one. 

Scholar John Durham puts it well in his commentary on Exodus, “Concern for the dis-privileged and humanitarian sensitivity are reflected throughout the OT, in every major dimension of its teaching.” Israel established laws to provide for people, from establishing a storehouse for local distribution to the poor (Deut. 26:12) to allowing people to glean food from fields (Lev. 23:22). But by lending to fellow Israelites without interest, it allowed people to survive while the Sabbath kept people from working themselves to death to repay the loan. 

Finally, Deuteronomy discusses the notion of lending at interest to those outside of the community. A key distinction is drawn as the term may denote a distinction based less on ethno-status and more about those belonging in the community who have nothing versus those with money seeking a profit- like a traveling merchant. It is for those attempting to profit of the dispirited. These laws, though primarily designed to protect the poor, also serve to shape the people of God, to form them into the kind of people they ought to be- compassionate, concerned, and actively seeking to help others. 

While these verses are differentiated by a plethora of differences from the Old Testament’s theocratic government to our state today, the command for God’s people to take care of those in need abides. After all, it is good and an issue of justice to lend freely (Ps. 112:5) and when we are asked, we should be quick to provide (Matt. 5:42). And even though Jesus talks about lending in the parable of the talents, his concern in the story is not to describe financial obligations to the poor. Yet, treatment of the economically dispossessed remains a central tenet in the New Testament too. The fledgling church is giving and sharing everything to provide (Acts 2:42), but they make a point to provide for the widows in need (Acts 6:1-7). Religion considered good and pure includes taking care of the widows and orphans (James 1:27). The trajectory established in the Pentateuch seeks to provide support for the ones most in need, taking care not to profit off their misfortune, but to protect their dignity and shape the community into the image of God. 

How Should We Respond?

Because what the Bible says about lending is intimately connected with an embodied concern for the poor, it should serve as a template for us today. First, we must work hard to recalibrate what forms our views about money and work. It starts with understanding that how we handle our money is not simply an economic issue, but can also be an issue of justice. After all, budgets are moral documents. 

Christians have historically taken similar economic issues incredibly seriously, whether it be legal prohibitions or the willingness to charge people for violating usury and sumptuary laws. If the people turning to these loan structures see it as necessary for survival, this ought to prompt us to act.

If we are to be the church, we need to exhibit solidarity with the poor, the ones in need and liable to be ripped off. As with Israel, a concern for those less fortunate ought to be close to our hearts. If loans were given for means of survival, what does it say when short-term finances are also used for means of survival (monthly bills, groceries, rent, emergencies)? If Israel was to live in a world where people’s misfortune was not to be taken advantage of, then should we not aim to do the same?

Some churches have already begun to make inroads in this arena, but more can be done. For example, some have partnered with local municipalities to establish protections for their congregants, while preaching on the topic and helping to craft their communities into the kinds of people who take notice of these things. Others have sought creative solutions, which includes establishing local credit unions to serve their communities. God curated laws to protect the poor; how can we sit idly by and not do the same? 

Additional pursuits can fortify our communities as well, such as providing courses and teaching on the topic. It may also require partnerships, not only with local governments, but with other churches, to be aware and understand the reality that our fellow brothers and sisters face. Individuals can also do their part by offering help in their embedded communities, whether through providing money, helping with job security, or meeting immediate needs. There are books, such as When Helping Hurts which provide practical advice for facing these solutions that combine theological depth with pragmatic solutions. Furthermore, legislative efforts can be presented to work at addressing systemic issues from a legal perspective including adequate regulative practices which remove the opaque blinders used to obfuscate accountability. The Bible does not give us a policy prescription, but a posture and ethic; what we do with them is up to us.

Christians in Texas should insist that their faith and values influence state politics on this issue. Predatory payday lending amounts to a great injustice in our society, affecting the most vulnerable among us. We can take steps today to advance justice in this critical area of public policy, and we should take them. 

Policy WisePreston S. Byrd